Behavioral Research in Auditing2011 AAA Auditing Doctoral Consortium

E. Michael BamberJ.M. Tull School of AccountingThe University of Georgia

Outline

Perspective: 1999 vs. 2010 Publishing BAuR Sources of Research Questions

Examples Issues

Publishing Trends - Numbers

1999 2010 % Increase

The Accounting Review

# of Papers 22 72 227

# of Auditing Papers 7 15 114

# of Behavioral Auditing Papers 3 7 133

Auditing: A Journal of Practice & Theory

# of Papers 17 25 47

# of Auditing Papers 17 25 47

# of Behavioral Auditing Papers 8 10 25

Publishing Trends - Numbers1999 2010 %

Increase

The Accounting Review

# of Papers 22 72 227

# of Auditing Papers 7 15 114

# of Behavioral Auditing Papers 3 7 133

Auditing: A Journal of Practice & Theory

# of Papers 17 25 47

# of Auditing Papers 17 25 47

# of Behavioral Auditing Papers 8 10 25

Consortium Participants 38 65 71

Publishing Trends - TopicsTitle Year Journal

The Audit Risk Model, Business Risk and Audit-Planning Decisions

The Audit Review Process and Sensitivity to Information Source Objectivity

The Influence of Documentation Specificity and Priming on Auditors’ Fraud Risk Assessments and Evidence Evaluation Decisions

A Field Experiment Comparing the Outcomes of Three Fraud Brainstorming Procedures

How do Audit Workpaper Reviewers Cope with the Conflicting Pressures of Detecting Misstatements and Balancing Client Workloads?

The Role of Problem Representation Shifts on Auditor Decision Processes

The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions

Joint Effects of Principles-Based versus Rules-Based Standards and Auditor Type in Constraining Financial Managers’ Aggressive Reporting

Publishing Trends - TopicsTitle Year Journal

The Audit Risk Model, Business Risk and Audit-Planning Decisions

1999 TAR

The Audit Review Process and Sensitivity to Information Source Objectivity

The Influence of Documentation Specificity and Priming on Auditors’ Fraud Risk Assessments and Evidence Evaluation Decisions

A Field Experiment Comparing the Outcomes of Three Fraud Brainstorming Procedures

How do Audit Workpaper Reviewers Cope with the Conflicting Pressures of Detecting Misstatements and Balancing Client Workloads?

The Role of Problem Representation Shifts on Auditor Decision Processes

The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions

Joint Effects of Principles-Based versus Rules-Based Standards and Auditor Type in Constraining Financial Managers’ Aggressive Reporting

Publishing Trends - TopicsTitle Year Journal

The Audit Risk Model, Business Risk and Audit-Planning Decisions

1999 TAR

The Audit Review Process and Sensitivity to Information Source Objectivity

1999 AJPT

The Influence of Documentation Specificity and Priming on Auditors’ Fraud Risk Assessments and Evidence Evaluation Decisions

A Field Experiment Comparing the Outcomes of Three Fraud Brainstorming Procedures

How do Audit Workpaper Reviewers Cope with the Conflicting Pressures of Detecting Misstatements and Balancing Client Workloads?

The Role of Problem Representation Shifts on Auditor Decision Processes

The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions

Joint Effects of Principles-Based versus Rules-Based Standards and Auditor Type in Constraining Financial Managers’ Aggressive Reporting

Publishing Trends - TopicsTitle Year Journal

The Audit Risk Model, Business Risk and Audit-Planning Decisions

1999 TAR

The Audit Review Process and Sensitivity to Information Source Objectivity

1999 AJPT

The Influence of Documentation Specificity and Priming on Auditors’ Fraud Risk Assessments and Evidence Evaluation Decisions

2010 TAR

A Field Experiment Comparing the Outcomes of Three Fraud Brainstorming Procedures

How do Audit Workpaper Reviewers Cope with the Conflicting Pressures of Detecting Misstatements and Balancing Client Workloads?

The Role of Problem Representation Shifts on Auditor Decision Processes

The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions

Joint Effects of Principles-Based versus Rules-Based Standards and Auditor Type in Constraining Financial Managers’ Aggressive Reporting

Publishing Trends - TopicsTitle Year Journal

The Audit Risk Model, Business Risk and Audit-Planning Decisions

1999 TAR

The Audit Review Process and Sensitivity to Information Source Objectivity

1999 AJPT

The Influence of Documentation Specificity and Priming on Auditors’ Fraud Risk Assessments and Evidence Evaluation Decisions

2010 TAR

A Field Experiment Comparing the Outcomes of Three Fraud Brainstorming Procedures

2010 TAR

How do Audit Workpaper Reviewers Cope with the Conflicting Pressures of Detecting Misstatements and Balancing Client Workloads?

The Role of Problem Representation Shifts on Auditor Decision Processes

The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions

Joint Effects of Principles-Based versus Rules-Based Standards and Auditor Type in Constraining Financial Managers’ Aggressive Reporting

Publishing Trends - TopicsTitle Year Journal

The Audit Risk Model, Business Risk and Audit-Planning Decisions

1999 TAR

The Audit Review Process and Sensitivity to Information Source Objectivity

1999 AJPT

The Influence of Documentation Specificity and Priming on Auditors’ Fraud Risk Assessments and Evidence Evaluation Decisions

2010 TAR

A Field Experiment Comparing the Outcomes of Three Fraud Brainstorming Procedures

2010 TAR

How do Audit Workpaper Reviewers Cope with the Conflicting Pressures of Detecting Misstatements and Balancing Client Workloads?

2010 AJPT

The Role of Problem Representation Shifts on Auditor Decision Processes

The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions

Joint Effects of Principles-Based versus Rules-Based Standards and Auditor Type in Constraining Financial Managers’ Aggressive Reporting

Publishing Trends - TopicsTitle Year Journal

The Audit Risk Model, Business Risk and Audit-Planning Decisions

1999 TAR

The Audit Review Process and Sensitivity to Information Source Objectivity

1999 AJPT

The Influence of Documentation Specificity and Priming on Auditors’ Fraud Risk Assessments and Evidence Evaluation Decisions

2010 TAR

A Field Experiment Comparing the Outcomes of Three Fraud Brainstorming Procedures

2010 TAR

How do Audit Workpaper Reviewers Cope with the Conflicting Pressures of Detecting Misstatements and Balancing Client Workloads?

2010 AJPT

The Role of Problem Representation Shifts on Auditor Decision Processes

1999 AJPT

The Effects of Fee Pressure and Client Risk on Audit Seniors’ Time Budget Decisions

1999 AJPT

Joint Effects of Principles-Based versus Rules-Based Standards and Auditor Type in Constraining Financial Managers’ Aggressive Reporting

2010 TAR

A Publishable Paper Provides Insights That Are:

New – Cause belief revision Interesting – Belief revision is

consequential True Clear

Deciding on a Topic

Prior literatureInnovations in practicePsychology theory

Prior Literature

Critically evaluate prior research (Sources: SSRN, Web of Science, AAA and conference websites)

What is the question? What is the research method? What is the punchline? Critique. What would we still like to know?

Prior Literature Build a framework

How do the prior papers fit together? Distill stylized facts: What do we think

we know? Identify research opportunities: What

would we like to know? Rely on others

Existing literature reviews and frameworks

Prior Literature - Examples Nelson, M. 2009. A model and literature

review of professional skepticism in auditing. Auditing: A Journal of Practice and Theory 28(2): 1-34. Framework for classifying failures in professional

skepticism (PS): More important antecedents? Definition of PS: Presumptive doubt?

Influence of traits and incentives? “Justifiable inefficiencies”

Incentives to avoid? Interventions to highlight and reward?

Prior Literature - Examples

Peecher, M.E., I. Solomon, and K.T. Trotman. 2010. Improving the quality of financial-statement audits by updating external auditors’ accountabilities. Working paper Focus less on penalties and more on rewards Propose 7 reforms, including

Refine the concept of professional skepticism Improve the content of the audit report Reward auditors who uncover fraud

Prior Literature - Examples

Hammersley, J.S. 2010. A Review and Model of Auditor Judgments in Fraud-Related Planning Tasks. Working Paper. Fraud knowledge obtained primarily from

training rather than experience Antecedents to effectively perform fraud

related tasks? Conditions under which auditors do/do not

respond to risk?

Innovations in Practice Carefully read and analyze the practice literature

(Sources: AICPA, PCAOB, SEC, Accounting firms) One-on-one communications

Distill state of practice: Where would the profession like to be?

Identify research opportunities: Improve practice? E.g., Carpenter, T. 2007. Audit team brainstorming, fraud

risk identification, and fraud risk assessment: Implications of SAS No. 99. The Accounting Review 82 (5): 1119-1140.

Messier, W.F., T.M. Kozloski, and N. Kochetova-Kozloski. 2010. An analysis of SEC and PCAOB enforcement actions against engagement quality reviewers. Auditing: A Journal of Practice & Theory 29(2): 232-252.

Innovations in Practice - Examples

PCAOB Standards New

AS No. 7 Engagement Quality Review Proposed

Concept Release on Requiring the Engagement Partner to Sign the Audit Report

Future The Auditors’ Reporting Model (2011

Agenda)

Innovations in Practice - Examples

PCAOB Inspection Reports Report on Observations of PCAOB Inspectors

Related to Audit Risk Areas Affected by the Economic Crisis (Sept. 2010) Fair value assumptions – failure to test beyond

inquiry of management Fair values – failure to reconcile inconsistencies

between management and third party estimates

Revenue recognition - failure to respond to specific risks, including risk of fraud

Psych Theory Coursework, esp. non-accounting Read the literature, esp. literature reviews

and seminal papers Citation searches for most recent work

Examples Wilks, T.J. 2002. Predecisional distortion of

evidence as a consequence of real-time audit review. The Accounting Review 77(1):51-72

Organizational Identity Theory, Small Group Theory, Social Identity Theory, Construal Level Theory

Developing the Topic

Goal: a publishable paper Consequential belief revision in

behavioral auditing will likely require integration of all three: Prior auditing literature – New – moving

literature forward Practice – Interesting – others care about

the topic Theory – New and Interesting – results

are generalizable/consequential

Issues Publishable topics?

Yes, more than ever (SOX, PCAOB standards agenda & inspection reports)

Journal interest? Yes, in select journals (TAR, AJPT, CAR, AOS) Top tier

Participants? The big issue, cycles Local vs. national Students

Lynch, A.L., U.S. Murthy, and T.J. Engle. 2009. Fraud brainstorming using computer-mediated communication: The effects of brainstorming technique and facilitation. The Accounting Review 84 (4): 1209-1232